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Book Review of The Four Cardinal Principles of Trading by Bruce Babcock

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This is a pretty unique book which focuses on trading techniques, specifically techniques to identify the trend, cut losses, let winners run, and manage risk. Babcock interviewed a number of professional traders on how they implement the four cardinal principles as Babcock calls them. Aside from this book, the only other book I can think of that focuses on techniques is probably Alexander Elder’s Entries & Exits: Visit to 16 Trading Rooms book.


The style of this book is in the same style as Jack Schwager’s Market Wizards book, but I find that Schwager’s book gives more insight because Schwager would probe deeper in his interviews, while Babcock did not probe deeper to clarify certain points which are unclear. Understandably, most people would not want to share their hard-earned ‘secrets’, so Babcock was likely treading a thin line to avoid making his interviewees uncomfortable. Nonetheless, if the whole point of the book is to go into the techniques, his interviewees need to be prepared to share else it defeats the point of the book.


All in all, I like the book and have picked up a few things from it. It is also great to see so many different methods that people have adopted for doing the same things. I wish that there are more books in the market where successful traders disclose their profitable systems in detail. Eventually it is highly unlikely that you can take someone’s system wholesale, but there are usually good things that you can learn from a successful system. I find it interesting that in the IT industry, there are so many people writing great open-source code that they freely share but in the trading industry, people are asking for thousands of dollars to share their system which either can’t be used wholesale or doesn’t work in the first place.


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